BALTIMORE (Stockpickr) -- Don't let yesterday's whopping 2.4% rally in the S&P 500 fool you -- there's still a whole lot of risk baked into the stock market right now.
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In the last two trading sessions, the S&P 500 has reclaimed all but 87 basis points of its early-December correction. That means shares are within grabbing distance of all-time highs again to end the year, thanks primarily to the Fed's interest rate comments on Wednesday. But the VIX Volatility Index remains on the high-end of its 3-year range this week.
More importantly, Average True Range, a statistical measure of volatility in the market, is racing up to test new post-2011 highs this month. Translation: risk is on the rise again. And that means that you need to cut ties with the stocks that look "toxic" here. That's why we're taking a technical look at five toxic stocks you should sell (or short) in December…
Just to be clear, the companies I'm talking about today aren't exactly junk. By that, I mean they're not next up in line at bankruptcy court. But that's frankly irrelevant; from a technical analysis standpoint, sellers are shoving around these toxic stocks right now. For that reason, fundamental investors need to decide how long they're willing to take the pain if they want to hold onto these firms in the weeks and months ahead. And for investors looking to buy one of these positions, it makes sense to wait for more favorable technical conditions (and a lower share price) before piling in.
For the unfamiliar, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better
So, without further ado, let's take a look at five "toxic stocks" you should be unloading.
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